Exam 15: Financial Planning and Forecasting

Which of the following can be computed as: necessary increase in assets minus spontaneous increase in liabilities minus projected increase in retained earnings?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the average approach? Year 2013 2014 2015 2016 2017 Sales \ 1,000,000 \ 2,000,000 \ 1,700,000 \ 1,800,000 \ 2,200,000

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach? Year 2013 2014 2015 2016 2017 Sales \ 500,000 \ 750,000 \ 700,000 \ 750,000 \ 775,000

What would be the appropriate way to forecast sales for a firm that has stable year-to-year sales, but seasonally fluctuating month-to-month sales?

Which of the following is defined as assuming that future sales will be equal to the average historical value across some relevant period?

Suppose that TV Industries, Inc. currently has the balance sheet shown as follows, and that sales for the year just ended were $5 million. The firm also has a profit margin of 15 percent, a retention ratio of 25 percent, and expects sales of $5.5 million next year. If all assets and current liabilities are expected to increase with sales, what amount of additional funds will the company need from external sources to fund the expected growth? Assets Liabilities and Equity Current Assets \ 1,000,000 Current Liabilities \ 1,000,000 Fixed Assets 2,000,000 Long-tern Debt 1,000,000 Equity 1,000,000 Total Assets \ 3,000,000 Total Liabilities ard Equity \ 3,000,000

________ assumes that future sales will be equal to the average historical value across some relevant period.

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach? Year 2013 2014 2015 2016 2017 Sales \ 1,000,000 \ 2,000,000 \ 1,700,000 \ 1,800,000 \ 2,200,000

Goldilochs Inc. reported sales of $8 million and net income of $2 million. The firm has a total asset turnover of 1.2. The firm's chief financial officer is projecting a $6 million increase in sales and that spontaneous liabilities will increase by $1 million automatically. The firm currently pays out 50 percent of its net income to shareholders. Assuming that all assets and current liabilities are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

Suppose a firm has had the historical sales figures shown as follows. What would be the forecast for next year's sales using the naïve approach? Year 2013 2014 2015 2016 2017 Sales \ 10,000,000 \ 10,500,000 \ 10,700,000 \ 11,000,000 \ 12,000,000

All of the following will tend to increase spontaneously with sales EXCEPT

Suppose you were forecasting sales for a firm that exhibited a cyclical pattern within each week. How would you go about forecasting sales for this firm?

Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 23 percent, a retention ratio of 40 percent, and expects sales of $20 million next year. If all assets and current liabilities are expected to grow with sales, what is the projected increase in retained earnings? Assets Iiabilities ard Equity Current Assets \ 2,000,000 Current Liabilities \ 2,500,000 Fixed Assets 8,000,000 Long-tern Debt 1,5000,000 Equity 6,000,000 Total Assets \ 10,000,000 Total Liabilities and Equity \ 10,000,000

Which of the following will increase the additional funds needed from external sources?

Goldilochs Inc. reported sales of $8 million and net income of $1.5 million. The firm has $10.5 million in total assets. The firm's chief financial officer is projecting a 20 percent increase in sales. If the firm's sales do increase by 20 percent, it is expected that spontaneous liabilities will increase by $500,000. The firm currently pays out 30 percent of its net income to shareholders. Assuming that all assets are expected to grow with sales, how much in additional funds will Goldilochs need from external sources to fund the expected growth?

The simplest approach to estimating a future period's sales is to assume that they will be equal to those of the latest observed period. In statistics, this is often simply referred to as which of the following?

Which of the following is likely to increase the firm's additional funds needed?

Abracadabra Inc. has total assets of $106,000 and a debt ratio of 40 percent. If last year's sales were $145,000 and sales are expected to grow 10 percent in the future, what is Abracadabra's capital intensity ratio?

Which of the following is the practice of one firm selling to another on credit terms?

Suppose that Wind Em Corp. currently has the balance sheet shown as follows, and that sales for the year just ended were $15 million. The firm also has a profit margin of 19 percent, a retention ratio of 30 percent, and expects sales of $22 million next year. If all assets and current liabilities are expected to grow with sales, what is the projected increase in retained earnings? Assets Iiabilities ard Equity Current Assets \ 2,000,000 Current Liabilities \ 2,500,000 Fixed Assets 8,000,000 Long-tern Debt 1,5000,000 Equity 6,000,000 Total Assets \ 10,000,000 Total Liabilities and Equity \ 10,000,000